The decision has been met with criticism from trans rights groups.
The rugby organisation said two registered players are affected by the decision, which is to come into effect in the forthcoming season.
The IRFU said the decision is "in line with that of World Rugby, the RFU and other governing bodies".
A statement adds that it "will mean that contact rugby for players in the female category is limited to those whose sex was recorded as female at birth".
The IRFU is to ban trans women and girls over the age of 12 from playing female contact rugby
Mike Egerton
It continues: “Recent peer reviewed research provides evidence that there are physical differences between those people whose sex was assigned as male and those as female at birth, and advantages in strength, stamina and physique brought about by male puberty are significant and retained even after testosterone suppression.”
The players affected have been contacted – and the IRFU added that trans men can continue to play rugby if written consent is provided and a risk assessment is carried out.
The Trans Equality Together coalition, built up of 20 members, condemned the policy change and called on the IRFU to immediately pause its “damaging” decision.
Moninne Griffith, chief executive of Belong To and co-director of Trans Equality Together, said the decision would have “deep-reaching negative consequences across society”.
They said in a statement: “It is openly sending a message to trans people, their families and allies that they are not welcome in the rugby community.
“It is also setting a dangerous precedent for other Irish sporting organisations to follow their lead in banning trans players.
“We note the IRFU’s values include respect, integrity, and inclusivity, this decision flies in the face of these values.”
The decision has been met with fury by The Trans Equality Together coalition
Steve Haag
The IRFU statement adds: “There are two registered players affected, in Ireland, by this change and the IRFU has discussed the matter directly with them including options to remain active in the game, such as non-contact playing formats (tag/touch rugby), refereeing, coaching, and volunteering, underlining that the IRFU values their ongoing involvement in the game.
“In the male category, players whose sex is recorded at birth as female may continue to play if they provide written consent and a risk assessment is carried out.
“The IRFU has spoken to players we are permitted to contact directly and will work with them to support on-going participation in the sport.”